Hostess Liquidation on Hold; Judge Orders Mediation

The bankrupt snack company said last week that it would lay off its workforce and liquidate its assets after the company's second biggest union went on strike.

Now the judge hearing the case has asked Hostess and its bakers' union to go into mediation before moving ahead with the liquidation, The Associated Press reports.

When the company first filed for Chapter 11 bankruptcy earlier in the year, it planned to cut costs by restructuring and renegotiating its labor contracts. Under the new contracts, 8-percent wage cuts would be implemented across the entire company, including management. In addition, employee health plans would be cut by 17 percent, and Hostess would stop contributing to multi-employer pension plans until 2015.

The Bakery, Confectionary, Tobacco Workers and Grain Millers International Union, Hostess' second-largest union, wasn't having it and decided to strike. Hostess said last week that the strike was the last nail in the company's coffin, and that it would now focus on laying off its workforce and selling its assets.

On Monday, bankruptcy Judge Robert Drain asked the company to pump the brakes. Drain requested that Hostess and the union enter into mediation to settle the contract dispute. The judge also called into question the motivations behind the strike, noting that the union immediately went on strike after rejecting the offer, rather than filing an objection to it in court.

"Many people, myself included, have serious questions as to the logic behind this strike," Drain said, according to the AP. "Not to have gone through that step leaves a huge question mark in this case."

Hostess and the bakers' union are expected to begin the mediation process Tuesday. If mediation fails, the company's beloved brands, including Twinkies and HoHos, will be sold to the highest bidder.

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